For the players involved in the Hewlett-Packard spying scandal, the relief of this week’s fizzled state prosecution could be short-lived.

Even before the California attorney general’s case dissolved in open court Wednesday, it had already been weakened – and overshadowed – by the ongoing federal investigation into HP’s boardroom shenanigans. To lawyers familiar with the HP matter, the state’s case became almost incidental after the U.S. Attorney’s Office revealed in January that it was jumping into the HP investigation by filing charges against a Colorado private investigator implicated in the spying drama.

Defense lawyers also openly doubt that federal prosecutors will go after former HP Chairwoman Patricia Dunn, whose role in any crime may be toughest to prove and who is battling the advanced stages of ovarian cancer.

“The federal government cannot ignore what happened in the state case and the public’s response to that,” said Tom Nolan, a lawyer for one of the defendants, former HP attorney Kevin Hunsaker. “The case was ill-conceived in state court and would be ill-conceived if they brought it in federal court.”

Federal prosecutors Thursday would say only that they are continuing to investigate the HP case.

In the state court proceedings, Attorney General Jerry Brown agreed to drop felony charges against Dunn and three remaining defendants, Hunsaker and investigators Ron DeLia and Matthew DePante. Superior Court Judge Ray Cunningham then dismissed the charges entirely against Dunn, citing her battle with cancer.

Hunsaker, DeLia and DePante pleaded no contest to misdemeanor charges, but Cunningham indicated he would toss those charges if they complete 96 hours of community service and compensate the victims.

Brown, who inherited the HP case from former Attorney General Bill Lockyer, was unavailable for comment Thursday. But Nathan Barankin, his spokesman, said the parallel federal investigation and prospect of federal indictments was a factor in negotiations that settled the state case.

State lawyers, Barankin said, have been told in recent weeks by federal prosecutors that the federal investigation remains active. A federal conviction would trump any state court conviction, thus weakening state prosecutors’ negotiating position in the state case.

Lockyer was first last fall to jump in with criminal charges accusing Dunn and the other defendants of violating California privacy laws as controversy swirled around HP. The case damaged HP’s reputation for clean business ethics, prompted congressional hearings and led to the resignations of Dunn and HP’s former general counsel, Ann Baskins.

But the federal government did not step aside and let the state handle the issue alone.

In January, federal prosecutors filed charges against Bryan Wagner, an investigator who pleaded guilty to two felonies, conspiracy and aggravated identity theft, and admitted using the practice of “pretexting,” impersonating a person to obtain private information, to get records of phone calls. The HP scandal focused on the use of pretexting in a probe ordered by Dunn to identify boardroom leaks to the media.

Wagner’s plea agreement, which remains under seal, called for him to cooperate with the government, signaling to many lawyers that prosecutors intended to press on with other charges. Prosecutors have indicated in Wagner’s case that they are focused on how HP and its hired investigators secured the Social Security numbers of the targets of the HP leak probe and their families, and who knew precisely what the tactics were.

Lawyers for the other defendants have portrayed Wagner as a rogue investigator who acted on his own. Meanwhile, they believe the case may get a fresh look with the recent resignation of U.S. Attorney Kevin Ryan, who has been replaced by Scott Schools, a Justice Department official running the office while the Bush administration searches for Ryan’s successor.